In a nod to automakers, the Commission plans to earmark 800 million euros ($927.7 million) to support the roll out of charging points for electric vehicles and 200 million euros for battery development.

Proposed credits for EVs and low emission cars such as plug-in hybrids are a policy innovation and would allow automakers to offset their overall target if the share of zero and low-emission vehicles in their fleet surpasses a benchmark set by regulators.

Zero-emission vehicles are battery electric and fuel cell vehicles while low-emission vehicles are defined as those having tailpipe emissions of less than 50g/km. These are mainly plug-in hybrid vehicles equipped with both a conventional and an electric engine. The limit would rule out most hybrid vehicles currently on sale.

Unlike California's system - viewed by many in the sector as the leading laboratory for policy on electric cars - EU regulators shied away from quotas.

The proposal will need the approval of EU governments and the European Parliament in a process that usually takes more than a year. It has already met with opposition from nations with big automotive sectors, such as Germany.

European automakers lobbied for the emissions reduction target to be set at 20 percent and have called for compliance to be conditional on consumer uptake of electric cars.

'Aggressive' target

ACEA, the auto industry's lobbying body, said the 2030 target for a 30 percent reduction is "overly challenging" and "very aggressive." In a statement, ACEA reiterated that the industry considers a 20 percent reduction to be achievable at a "high, but acceptable, cost."

In separate comments, Germany's VDA car lobby group said it views the EU's targets as hard to meet and putting European automakers at a disadvantage in global markets. "From today's perspective, it is more than questionable whether the proposed CO2 targets are achievable. That will depend largely on how fast customers will accept alternative engines in the coming years and how fast public infrastructure is built," VDA said in a statement.

The EU's current caps on CO2 from cars are 130g/km set for 2015 and 95g/km fixed for 2021. The existing limits are averages for the EU fleet as a whole, with individual manufacturers having specific targets backed by financial penalties.

The system of penalties for breaches will remain in place for the 2025 and 2030 limits. Under the draft proposal, if carmakers are found in breach of rules, they face penalties of 95 euros for every gram of CO2 above the limit and for each new vehicle registered in a given year.

The reductions are part of the EU's stepped-up fight against global warming. Europe is gearing up for a technological revolution in road transport that will eventually see the end of combustion engines in favor of greener alternatives.

The European Commission is taking advantage of the landmark climate-protection agreement reached by almost 200 countries in Paris in late 2015 to get a grip on European road-transport pollution, which has bucked a general trend of falling EU discharges of greenhouse gases including CO2 that are blamed for climate change. Under the Paris accord, the EU aims to slash such pollution by at least 40 percent in 2030 compared with 1990.

EV race with China

The European Commission is keen for legislation to stimulate European industry to develop electric vehicles, afraid that it is falling behind China, Japan and the United States.

"The competition is here," Commission Vice President Maros Sefcovic said, citing the use of Chinese electric cars by Brussels taxis firms. "The car was invented in Europe and I believe it should be reinvented here."

Miguel Arias Canete, EU climate and energy commissioner, said of the Commission's proposal: "There is a component of trying to facilitate the development of a powerful car-manufacturing industry of electric vehicles."

While China expands its electric-vehicle prowess with the blunt policy of quotas, Europe is counting on a more nuanced approach that would force carmakers to choose between making the combustion engine cleaner or abandoning it in favor of electric vehicles.

The Chinese market already boasts 400 types of electric vehicles, whereas Europe has six, according to Canete. India, meanwhile, aims for all new passenger cars sold by 2030 to be electric.

"There is a huge gap between the European Union, which invented the car, and developing countries," Canete said. "This proposal has this element of incentives in order to induce car manufacturers to come along with a substantial number and a substantial variety of electric vehicles."

Outrage over Volkswagen's cheating on emission tests in the U.S. has also put pressure on EU regulators to seek tougher controls. "Europe's car industry must regain the trust of its consumers," Canete said. "We want the European automotive industry get back in the race for global leadership on clean vehicles."

The Commission also set targets for public authorities to source a percentage of either low emission or zero emission vehicles in their public procurement by 2030, for example garbage trucks.